The global competitiveness of the Chinese wooden furniture.docx

1、The global competitiveness of the Chinese wooden furnitureThe global competitiveness of the Chinese wooden furniture industry Xiao Hana, 1, , Yali Wena and Shashi Kantb, , aSchool of Economics and Management, Beijing Forestry University, P.O. Box425, Beijing, 100083, Peoples Republic of ChinabFacult

2、y of Forestry, University of Toronto, 33 Willcocks Street, Toronto, Ontario, Canada M5S 3B3Received 31 December 2008; revised 13 April 2009; accepted 27 July 2009. Available online 5 September 2009. AbstractDuring the past two decades, the Chinese wooden furniture industry has witnessed high-speed g

3、rowth, making China a leading furniture exporter. Given the intensification of global competition, it is crucial to assess the present status and competitiveness of the Chinese wooden furniture industry, as well as the changes and challenges China will face in competing with other principal trading

4、nations. Based on Balassas Revealed Comparative Advantage (RCA) Indices, it can be concluded that China has experienced a transition from comparative disadvantage into a high comparative advantage over the period, and has maintained a strong position in this labor-intensive industry. However, it sti

5、ll falls behind traditionally strong competitors such as Italy and Germany in terms of quality and unit price. It is also experiencing a growing challenge from lower-income countries such as Poland and Vietnam. Moreover, China now faces up more unfavorable macroeconomic circumstances such as rising

6、cost, shrinking international demand, technology gap and escalating trade barriers. Thus, the government, industrial association and enterprises need to quickly take innovative steps coordinately to promote Chinese enterprises transitioning from the original equipment manufacturers (OEM) to the orig

7、inal design manufacturers (ODM), further to the original brand manufacturers (OBM).Keywords: Balassas revealed comparative advantage; China; Competitiveness; Wooden furniture industry; World tradeArticle Outline1. Introduction2. Overview of Chinas wooden furniture industry2.1. Production trends 2.2.

8、 Enterprisesconcentration, ownerships, and performance 2.3. Industrial distribution 2.4. Exports3. Methodology for competitive analysis3.1. Market share (MS) 3.2. Revealed comparative advantage (RCA) 3.3. Trade competitiveness (TC)4. Selection of competitors and data5. Results5.1. Trends in Chinas m

9、arket share competing with other nations 5.2. Trends of RCA within Chinas wooden furniture industry 5.3. Trends in Chinas RCA competing with other nations 5.4. Trends in Chinas trade competitiveness with other nations6. Emerging challenges facing the industry6.1. Increasing cost 6.2. Technology gap

10、and innovations 6.3. International trade disputes and barriers 6.4. Deteriorating terms of trade 6.5. Macroeconomic factors7. Discussion and conclusionsAcknowledgementsReferences1. IntroductionGlobal trade in furniture has grown rapidly in the past decades because of packing and shipping innovations

11、 such as ready-to-assemble and knock-down furniture as well as decreasing world trade barriers. The increased openness in the furniture markets has caused the international trade of furniture to grow faster than furniture production and the international trade of manufactures (CSIL, 2008). The world

12、 trade of furniture has increased from US$42billion in 1997 to US$97billion in 2007 (You, 2007). There has also been a dramatic shift in the supply and flow of furniture in the global market. China has made remarkable progress in furniture production and export in the global supply and flow shift. T

13、he Chinese furniture industry has now become a huge integrated industry, with five million employees and US$55.26billion in output, accounting for 18% of total world production (Cao et al., 2004 and Virginia et al., 2003). Additionally, the combination of plentiful skilled labor and low costs enable

14、d China to provide wooden furniture to the international market at highly competitive prices. China has emerged as one of the major suppliers in the world furniture market; from 1997 to 2006, Chinas share increased from 4% to 19% (CSIL, 2008).The wooden furniture industry has retained an important n

15、iche in the Chinese furniture industry, and is ranked at the top in terms of production and export value among all furniture categories (SITV Rev.3 8215). As the main export forest product, it accounted for 52.96% and almost 50% of the Chinese furniture output and export, respectively, in 2005, acco

16、unting for the largest share of the global market.Given the intensification of global competition, it is crucial to assess the present status, competitiveness, and challenges of the Chinese wooden furniture industry (Li, 2007 and Zhang et al., 2008). In the next section, we provide an overview of Ch

17、inas wooden furniture industry. In Sections 3 and 4, we describe the methodology and selected data used in the competitiveness analysis. In Section5, we present the analysis results of Chinas competitiveness against other leading furniture trading nations over the past 15years. In Section6, we point

18、 out the main emerging challenges facing the industry in China. Finally, in Section7 we conclude our findings and discuss the need to apply more effective econometric models in global industry competitiveness analysis.2. Overview of Chinas wooden furniture industry2.1. Production trendsDriven (Virgi

19、nia et al., 2003) by the rapid development of the domestic economy, high foreign investment and a booming export business, Chinese furniture manufacturing has made remarkable progress (Research and Market, 2006). Since the mid-1990s, the Chinese furniture industry has experienced fast growth, with a

20、n annual gross production that grew from 61.2billion yuan in 1996 to 340billion yuan in 2005, with the average annual growth rate at 21.4% (China National Furniture Association (CNFA, 2006), Fig.1). The development of the Chinese furniture industry has far exceeded Chinas average industry growth rat

21、e (10%), as well as the countrys gross domestic product (GDP) growth rate (7% to 9%) during the same period (Cao et al., 2004).Full-size image (34K)Fig.1. Chinese furniture industry gross product.View Within ArticleThe wooden furniture industry has retained an important niche in Chinese furniture ma

22、nufacturing, and it has experienced rapid expansion in recent years. Although its share of total production declined from 80% to 53%, it is still at the top in terms of production and export value among all furniture categories, and accounts for over one-third of Chinas total timber product exports

23、each year (Sun et al., 2005).2.2. Enterprisesconcentration, ownerships, and performanceWooden furniture production is a resource-based, labor-intensive industry, with low entry barriers in trade. The industry is fragmented in China, with few large firms and numerous small manufacturing producers. Up

24、 to the end of 2006, there were only 2149 manufacturers with total annual sales revenue of more than 5million yuan in China, accounting for 3% of the total industry (OCN, 2007). The concentration rate is used as an indicator of the relative size of firms in relation to the industry. One commonly use

25、d concentration ratio is the four-firm concentration ratio (CR4), which consists of market share as a percentage of the four largest firms in the industry. The CR4 of Chinese wooden furniture manufacturing is only 6.62% of the total sector turnover (Jin, 2007), indicating the perfect competition mar

26、ket of this industry.There are several types of ownership, with at least 90% of companies not state-owned. According to data in the 2003 Chinese Furniture Investment Report, among the 6937 wooden furniture manufacturers selected, 83.56% are collective enterprises, 7.12% are joint ventures, and only

27、6.79% are state-owned (Stock Exchange Executive Council, 2003).The profit rate of Chinese wooden furniture manufacturers has been stable, averaging at 4% in recent years (Jin, 2007). Though higher than other product types within the furniture industry, it is still lower than that of other rapidly de

28、veloping industries.2.3. Industrial distributionOver 80% of Chinese furniture firms are located in four regions stretching from the south to the east coastline of China (see Fig.2). Overall, the four regions accounted for 94.5% of the total output, with southern China alone producing more than half

29、of the total amount. With 34% of the total domestic production in 2005 (CNFA, 2006), Guangdong has been at the top of production for years, followed by Zhejiang, Fujian, Shandong, and Liaoning. Increasing investments from Hong Kong, Taiwan, and some American and European furniture manufacturers have

30、 expanded capacity since the late 1980s, contributing to this distribution (Sun et al., 2005). Approximately 50% of exports are from one South China provinceGuangdong.Full-size image (48K)Fig.2. Industry gross product by area 2005.View Within Article2.4. ExportsIn the past two decades, the Chinese f

31、urniture industry has witnessed accelerated growth, and China is quickly becoming the worlds furniture manufacturing center and biggest exporter. The international competitiveness of Chinas wooden furniture industry has improved dramatically, and China is now a major exporter of wooden furniture. Chinas wooden furniture exports rose almost ten times in value, with a double-digit annual growth rate since the 1990s, higher than the world average rate (Fig.3).Full-size image (44K)Fig.3. China and global wooden furniture export performance, 19932007.View Within ArticleWi